By Natsuko Waki
LONDON (Reuters) - The world's top investors cut exposure to emerging European equities to a five-month low in February as they fretted over a spillover from tensions in Ukraine and Russia, Reuters polls showed on Friday.
Concerns over China's economic slowdown also prompted fund managers to trim their Asian equity holdings to a four-year low and instead boost euro zone equity weightings to the highest since June 2011.
The monthly polls covering 50 leading investment houses in the United States, Japan and Europe were taken between February 12 and 27, when three months of protests in Ukraine culminated in the overthrow of Moscow-backed Viktor Yanukovich, leaving an unstable political situation.
Central European assets have been under pressure as investors fear a possible default in Ukraine's sovereign debt and the prospect of military conflict involving Russia.
However, overall equity holdings stood at 51.1 percent, holding near a one-year high, underscoring investor confidence in the U.S.-led global economic recovery.
"Despite the current emerging market weakness, an overall improving economic environment for 2014 should be supportive for risk assets in the next quarters," said Boris Willems, strategist at UBS Global Asset Management.
"Nonetheless, investors should accept higher volatility, as negative news might weigh heavier on market sentiment."
Emerging European equity holdings fell to 1.8 percent, after hitting a four-year high of 2.4 percent last month.
Emerging Asian equity holdings fell to 6.0 percent, the lowest since at least January 2010. In contrast, continental European weightings rose for a third month in a row to 18.9 percent, the highest since June 2011.
"The case for emerging market currencies and equities is not compelling yet as the momentum of growth expectations remains negative and tapering in the U.S. may continue to undermine carry trades," said Chris Paine, director of asset allocation at Henderson Global Investors.
Fixed income holdings fell to 35.5 percent, levels not seen since April 2012. Within the asset class, North American allocation fell to 34.3 percent, the lowest since May 2010.
CAUTION IN U.S., EUROPE
U.S. investors pushed their equity holdings to a four-month low of 56.2 percent of their model portfolios. The biggest declines came in the percentage of assets invested in Japanese stocks, which fell to 4.6 percent of assets.
Continental European investors cut their equity holdings in emerging Europe to 1.9 percent, their lowest since September 2012. The weighting of debt holdings in the region stood at 1.4 percent, rising for the first time in three months.
Japanese fund managers raised equity holdings to a 2 1/2-year high of 46.1 percent, favoring U.S. shares. They cut their bond allocations to 46.8 percent, the lowest since October 2011.
British investors slashed their bond holdings to 22.8 percent from 24.2 percent in January, their lowest level since at least May 2012. Allocation to emerging European equities halved to 1 percent.
(Additional reporting by Jemima Kelly and Joshua Franklin in London, Rahul Karunakar in Bangalore, David Randall in New York and Hideyuki Sano in Tokyo; Editing by Susan Fenton)